Cricket Boosting Barbados Economy

by Amanda Banks, Tax-News.com, London

12 May 2006

The Barbados Central Bank says the economy expanded at an estimated annual rate of 4.4% in the first quarter of 2006, marking its seventh consecutive quarter of real GDP growth above 3%.

Much of the island's economic exuberance is due to preparations for the cricket World Cup. The Bank says that non-traded sectors continued to fuel the expansion, bolstered by an ongoing construction boom, while a pick-up in tourism and manufacturing activity boosted traded output.

Unemployment remains low, while inflation shows signs of moderating. The Government recorded a budgetary surplus, due to buoyant tax revenues.

The tourism industry staged a partial recovery during the first three months of 2006, although restricted itineraries forced on cruise operators by high fuel costs have dimished cruise traffic to Barbados. However, longstay tourism compensated for the shortfall, expanding by approximately 4.1%.

Sugar production declined by 2.8%, reflecting a cutback in acreage planted and a delayed start to the crop. Non-sugar agriculture and fishing rebounded from a 1.6% decline between January and March 2005 to post growth of 2.1%. The construction industry advanced by 9.7%, after growing by 16.0% a year.

Total Government revenue surged by an estimated 25.0% during the quarter, underpinned by strong growth in tax revenues. Direct taxes accounted for much of this, growing by 42.4% despite the lowering of the personal, corporate and property tax rates and the raising of personal allowances. Notably, there was a spike of about 21.1% in indirect taxes, as prepayments of value-added tax (VAT) and import duties made in 2005 were recorded in early 2006, contributing to sharp increases of around 40.2% and 9.0% respectively in those two categories.

The Bank says that the Barbadian economy is expected to equal its 2005 performance in 2006, with real GDP set to grow by about 4 percent, led once more by the nontraded sectors.

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